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Thursday, August 26, 2010

Market Thought... Dear Tony Robbins

I was truly bothered after seeing his economic rants on Youtube (video part 1 and part 2). I mean why the hell is a guy who's objective in life is to bring mental clarity to people, yet his message in these videos are so obscure and vague, that only brings more confusion.

His rant bothered me so much that this post was originally going to start with this line (after a warning of crudeness, of course :)... "Yo, Tony, take a step back and FUCK YOUR OWN FACE!!!" (courtesy of Tropic Thunder, the movie:)

After days of thinking and pondering the whole economic situation (facilitated by the decline of the Treasury yields), as so often happens when at a market precipice, I have relaxed and no longer wanted to make an angry post. Especially since I think he does not mean to talk out of his ass, and is just trying to tell people to simply educate themselves.

The ultimate conclusion from his rant was to tell his followers that the markets would ultimately go down. What really bothered me about his message was that he articulated the opinions of others who apparently have a great grasp of the current economic climate, and while those opinions hold truths, there are levels of complexity that were completely ignored and masked by the phrases "do your own homework" or "educate yourself" or "i am not a financial adviser" or "i am not a trader". With these 'masks' there was also a large level of vagueness, suggesting this 'winter' (bad market) could come any day now, 3 or 6 months from now.

His rant omits the fact that the stock market is not a function of the economy. A stock is simply a piece of paper that gives ownership to a company. A company is valued on the premise of the amount of money the entity can generate. Since this paper is the ownership of the company, the paper has value.

The line items he points out are true. The best and most recent example is J. Crew giving their guidance today. While JCG beat, their guidance reflects the cautiousness of the consumer. But this is NOT new. Any company with direct dependence of the American consumer was and is in jeopardy. (You can bet your ass the J. Crew numbers will force downward revisions on estimates toward retail.)

There is no secret the US economy is slowing down. A new normal, I am sure one of his clients would say, maybe? :) There is also no secret Japan and Europe are in no better shape. So companies that are incubated within those countries are going to go through a patch of potentially stagnant earnings.

On the other hand, the global economy has new players, when combined, are major players. (As I highlighted in my 'think a little' post.) These players are growing, and the very items that Robbins states that make the US economy weak, make the BRIC countries strong. This makes companies like IBM, AAPL, CSCO and shit load of other SP500 companies with international exposure very interesting. (Especially if a company's product focuses on business, and businesses are not shy to spend right now or the product is in a league of its own.)

At the moment, the market is dealing with very interesting multiples. As JCG suggests, analysts will bring down earnings to companies too exposed to the US consumer. (This is what is to be expected when a GDP enters a stagnating environment.) BUT, J. Crew is no IBM or MCD, yet all stocks are being lumped in the same sinking boat.

Tony Robbins, you just helped you naive viewers to throw out the baby with the bath water, but its okay, I am sure they will "educate themselves" this time around.